The two promoter groups of IndiGo, India’s largest airline, have buried the hatchet after settling a pending case with the stock market watchdog Securities and Exchange Board of India (SEBI).
IndiGo’s parent company InterGlobe Aviation, in which co-founder Rahul Bhatia’s InterGlobe Enterprises is the largest shareholder, has paid 21 million rupees (US$288,000) to the market watchdog to settle the case. The board has disposed of adjudication proceedings against InterGlobe Aviation following the settlement.
Rakesh Gangwal, the other co-founder, had in July 2019 approached the board seeking its intervention to address certain issues at IndiGo. Gangwal had alleged violations of corporate governance norms, related party transactions, and a failure to make a timely intimation of important information to board of directors. He had also stated in his complaint that there was misrepresentation in the company’s Red Herring Prospectus dated October 16, 2015.
The watchdog had examined the issues and based on its investigation, a show-cause notice was issued to InterGlobe Aviation on November 10 last year. After getting the notice, the IndiGo promoter had proposed to settle the proceedings “without admitting or denying the findings of fact and conclusions of law” and filed a settlement application with the board.
The application was filed on December 23 last year and the terms of InterGlobe Aviation were placed before the high-powered advisory committee on January 25. During the adjudication proceedings, the committee recommended that it be settled on a payment of 21 million rupees. The same was communicated to the company on February 5 and it paid the amount on February 8.
Gangwal’s Rakesh Gangwal Group holds a 36.64% stake in InterGlobe Aviation, while Bhatia’s InterGlobe Enterprises holds 38.21% and the rest is held by the public. However, Bhatia and his associates wield much greater control over the board and management.
The budget airline was founded in 2005 and went public 10 years later. As of December 2020, it had a market share of 53.9% and operates a fleet of 283 aircraft. However, the Covid-19 travel curbs and the Indian government’s imposition of a two-month lockdown from March 25 had badly hit the airline, along with its peers. The company had reported quarterly losses and to tide over the crisis resorted to layoffs and pay cuts.